myla-mgt 103
-
Upload
ann-sollesa-ferreras -
Category
Documents
-
view
235 -
download
0
Transcript of myla-mgt 103
-
8/6/2019 myla-mgt 103
1/36
1
-
8/6/2019 myla-mgt 103
2/36
TheThe separationseparation ofof ownershipownership andandcontrolcontrol refersrefers toto thethephenomenonphenomenon associatedassociated withwithpubliclypublicly heldheld businessbusinesscorporationscorporations inin whichwhich thethe
shareholdersshareholders ((thethe residualresidualclaimantsclaimants)) possesspossess littlelittle or or nonodirectdirect controlcontrol overover managementmanagementdecisionsdecisions..
2
-
8/6/2019 myla-mgt 103
3/36
ShareholdersShareholders elect directors whoelect directors who
appoints managersappoints managersDirectorsDirectors representsrepresents
shareholders interests andshareholders interests anddetermines the broad policiesdetermines the broad policiesthat the managers will carry outthat the managers will carry out
Professional managersProfessional managers areareemployed by shareholders onemployed by shareholders onwhich twhich they depend on.hey depend on.
3
-
8/6/2019 myla-mgt 103
4/36
Historically, firms were managed bythe founder ownersfounder owners & theirdescendantsdescendants.
The managerial revolution led toseparation of ownership & control
which is the basis of the modernpublic corporation.
4
-
8/6/2019 myla-mgt 103
5/36
He is best known among economists and
corporate law specialists for hisgroundbreaking work in corporategovernance.
He was the author of The Modern Corporation
and Private Property, a groundbreaking work oncorporate governance, and an important
member of U.S. President Franklin Roosevelt's
"Brain Trust".
5
-
8/6/2019 myla-mgt 103
6/36
The Modern Corporation and PrivateThe Modern Corporation and Private
PropertyProperty,, which he co-authored witheconomist Gardiner MeansGardiner Means,, remains themost quoted text in corporate governancestudies.
BerleBerle and Meansand Means showed that the meansof production in the U.S. economy werehighly concentrated in the hands of thelargest 200 corporations, and that within
the large corporations managerscontrolled firms despite shareholders'formal ownership.
6
-
8/6/2019 myla-mgt 103
7/36
Basis of the Modern Corporation
Shareholders purchase stock, becoming
residual claimants Shareholders reduce risk by holding
diversified portfolios
Professional managers are contracted to
provide decision making
7
-
8/6/2019 myla-mgt 103
8/36
Modern public corporation formleads to efficient specialization oftasks:
Risk bearing by shareholders
Strategy development anddecision making by managers
8
-
8/6/2019 myla-mgt 103
9/36
9
Hire
and create
-
8/6/2019 myla-mgt 103
10/36
Agency relationships are formed by the
mutual consent of a principalprincipal and an
agentagent. AgencyAgency is the fiduciary relationshipfiduciary relationship
which results from the manifestation ofconsent by one person to another that
the other shall act in his behalf and
subject to his control, and consent by
the other so to act.
10
-
8/6/2019 myla-mgt 103
11/36
Agency LawAgency Law The large body of
common law that governs agency.
A mixture of contract law and tort law.
PrincipalPrincipal The party who employs
another person to act on his or her
behalf.
AgentAgent The party who agrees to act on
behalf of another.
11
-
8/6/2019 myla-mgt 103
12/36
PrincipalsPrincipals
obligationobligation totoperform theperform the
contractcontract
12
PrincipalPrincipal
AgentAgent Third PartyThird Party
AgencyAgency
ContractContract
Contract with third party on
behalf of principal
-
8/6/2019 myla-mgt 103
13/36
Any person who has the capacityto contract can appoint anagent to act on his or her behalf.
Persons who lackcontractualcontractualcapacitycapacity cannot appoint anagent.
e.g., insane persons and minors
13
-
8/6/2019 myla-mgt 103
14/36
An agency can be created only
to accomplish a lawful purpose.
Agency contracts that arecreated for illegal purposes or
are against public policy arevoid and unenforceable.
14
-
8/6/2019 myla-mgt 103
15/36
15
EmployerEmployer--Employee RelationshipEmployee Relationship
PrincipalPrincipal--Agent RelationshipAgent Relationship
PrincipalPrincipal--Independent ContractorIndependent Contractor
RelationshipRelationship
-
8/6/2019 myla-mgt 103
16/36
A relationship that results when an
employer hires an employee to
perform some form of physical service. An employee is not an agent unless
he or she is specifically empowered to
enter into contracts on the principalemployers behalf
16
-
8/6/2019 myla-mgt 103
17/36
An employer hires an employee and
gives that employee authority to act
and enter into contracts on his or herbehalf.
The extent of this authority is governedby any express agreement between the
parties and implied from the
circumstances of the agency.
17
-
8/6/2019 myla-mgt 103
18/36
Principals employ persons or businesseswho are not employees to perform
certain tasks on their behalf. These persons and businesses are called
independent contractorsindependent contractors.
A principal can authorize an
independent contractor to enter intocontracts. Principals are bound by the authorized
contracts of their independent contractors
18
-
8/6/2019 myla-mgt 103
19/36
The crucial factor in determiningwhether a person is an employee
or an independent contractor isthe degree of controldegree of control that theprincipal has over that person.
19
-
8/6/2019 myla-mgt 103
20/36
20
Type of RelationshipType of Relationship DescriptionDescription
EmployerEmployer--EmployeeEmployee The employer has the right to control the physicalThe employer has the right to control the physical
conduct of the employee.conduct of the employee.
PrincipalPrincipal--AgentAgent The agent has the authority to act on behalf of theThe agent has the authority to act on behalf of the
principal as authorized by the principal and impliedprincipal as authorized by the principal and implied
from the agency.from the agency.
An employee is often the agent of his employer.An employee is often the agent of his employer.PrincipalPrincipal--IndependentIndependent
ContractorContractor
The principal has no control over the details of theThe principal has no control over the details of the
independent contractors conduct.independent contractors conduct.
An independent contractor is usually not an agent ofAn independent contractor is usually not an agent of
the principal.the principal.
-
8/6/2019 myla-mgt 103
21/36
21
ExpressExpress
AgencyAgency
ImpliedImplied
AgencyAgency
ApparentApparent
AgencyAgency
Agency byAgency by
RatificationRatification
-
8/6/2019 myla-mgt 103
22/36
An agency that occurs when a principaland an agent expressly agree to enter
into an agency agreement with eachother. Exclusive agency contract
Power of attorney
Express agency contracts can be eitheroral or written unless the Statute ofFrauds stipulates that they must bewritten.
22
-
8/6/2019 myla-mgt 103
23/36
An agency that occurs when a principal
and an agent do not expressly create an
agency. The agency is implied from the conduct
of the parties.
The extent of the agents authority isdetermined from the particular facts and
circumstances of the particular situation.
Incidental authority
23
-
8/6/2019 myla-mgt 103
24/36
Agency that arises when a principal
creates the appearance of an agency
that in actuality does not exist. When an apparent agency is
established, the principal is estoppedestoppedfrom denying the agency relationship.
It is the principals actions that create an
apparent agency.
24
-
8/6/2019 myla-mgt 103
25/36
Agent must act on behalf of principal.
Principal must affirm entire deal
Principal must affirm before third party
withdraws from transaction Principal and 3rd party must have legal
capacity to contract when Agent made
the deal Principal must know all the materials
facts involved in the transactions.
25
-
8/6/2019 myla-mgt 103
26/36
26
Type of AgencyType of Agency DefinitionDefinition Enforcement of the ContractEnforcement of the Contract
ExpressExpress Authority is expresslyAuthority is expressly
given to the agent by thegiven to the agent by the
principal.principal.
Principal and third party arePrincipal and third party are
bound to the contract.bound to the contract.
ImpliedImplied Authority is implied fromAuthority is implied from
the conduct of the parties,the conduct of the parties,
custom and usage of trade,custom and usage of trade,or act incidental to carryingor act incidental to carrying
out the agents duties.out the agents duties.
Principal and third party actsPrincipal and third party acts
are bound to the contract.are bound to the contract.
-
8/6/2019 myla-mgt 103
27/36
27
Type of AgencyType of Agency DefinitionDefinition Enforcement of the ContractEnforcement of the Contract
ApparentApparent Authority created when theAuthority created when the
principal leads a third partyprincipal leads a third party
into believing that theinto believing that the
agent has authority.agent has authority.
Principal and third party arePrincipal and third party are
bound to the contract.bound to the contract.
By RatificationBy Ratification Acts of the agentActs of the agentcommitted outside thecommitted outside the
scope of his authority.scope of his authority.
Principal and third party arePrincipal and third party arenot bound to the contractnot bound to the contract
unless the principal ratifies theunless the principal ratifies the
contract.contract.
-
8/6/2019 myla-mgt 103
28/36
General agentsSpecial agents
28
-
8/6/2019 myla-mgt 103
29/36
Are authorized by the principal
to transact all of the affairs inconnection with a particular kindof business or trade or to transactall of the company's business,
these agents are generallyemployees of the company.
29
-
8/6/2019 myla-mgt 103
30/36
These are authorized by theprincipal to transact a definitebusiness affair or to do aspecific act, these agents are
generally third parties hired bythe company under anagreement.
30
-
8/6/2019 myla-mgt 103
31/36
31
-
8/6/2019 myla-mgt 103
32/36
The principal-agent problem or agency
dilemma arise under conditions of
incomplete and asymmetric information
when a principal hires an agent,
The two may not have the same interestsWhile the principal is, presumably, hiring
the agent to pursue the interests of theformer, the agent may shirk some duties to
pursue his/her own interests
32
-
8/6/2019 myla-mgt 103
33/36
33
-
8/6/2019 myla-mgt 103
34/36
Performance: reasonablediligence and skill (special skill)
Notification to principal
Loyalty (no conflict of interest)
ObedienceAccounting
34
-
8/6/2019 myla-mgt 103
35/36
Compensation (express orimplied)
Reimbursement and
indemnification
CooperationProvide safe working conditions
35
-
8/6/2019 myla-mgt 103
36/36
36